What Do You Mean It's Not Covered: Punishing the Pushing Insurance Company
At the conclusion of the administrative proceedings, Insurance Commissioner Smith issued a final agency order against Life Investors on both counts and imposed a $5,000 fine as a sanction for the violations. Life Investors sought judicial review of that ruling; and the district court affirmed the Insurance Division's conclusions. The insurance company appealed, arguing that Smith had erroneously determined that Yannacito was Life Investor's agent when he was actually the Cozzas' agent. Life Investors claimed that because Yannacito was the Cozzas' agent, it could not be held responsible for his misstatements. The appeals court ruled that Yannacito was a "soliciting agent" who acted on Life Investors' behalf in the transaction with the Cozzas. "The evidence indicates that Yannacito had previously sold group health insurance to Charles Cozza's employer. It was at the employer's request, not Cozza's, that he spoke with the employees," the court wrote. For this reason, the Insurance Division "could properly conclude that Yannacito was holding himself out, prior to any direct contact or solicitation by Cozza, as a person who worked with certain insurance companies and could provide health/life insurance to these employees." Colorado insurance law firmly supported this conclusion. It used the following definition:
Defining the Phrase "Insurance Agent"
Insurance Agent: means a person appointed by an insurer to solicit applications for a policy of insurance or to negotiate a policy of insurance on its behalf....Every insurance agent or limited insurance representative who solicits or negotiates an application forinsurance of any kind shall be regarded as representing the insurer and not the insured or his beneficiary in any controversy between the insured or his beneficiary and the insurer. Case law also supported the Cozzas and the regulators. In the 1983 decision -- Northwestern National Casualty Co. v. State -- the same appeals court considered whether an insurance agent who had acted as an insurance broker was the agent of the insured. Relying largely on the language in the employment policy which stated that the agent was appointed by the insurance company and was authorized to represent the company in order to "solicit, sell and service policies on its behalf," the court had determined that the broker fell within the definition of insurance agent as set out in state law. Thus, he was determined to be an agent of the insurer. Yannacito had signed an employment contract with Life Investors which had almost identical language. Life Investors also argued that, if Yannacito was acting as its agent, his misrepresentations to the Cozzas concerning the availability of insurance misrepresented stated company policy and was outside the scope of his authority. Therefore, Life Investors argued, it couldn't be held liable for such statements.
